Empirical Analysis Of Financial Non-balanced Development And Urban-rural Income Gap

In developing countries, income gap is a key concern. The widening income gap is not only a bottleneck of economy, but also a significant danger to social harmony and political stability. Different countries or different regions have different reasons. Because.of the existence of the household registration.system, dual economic structure is abnormal obviously, and income also presents two different levels. In2011, the per capita disposable income of the urban households is21809.78yuan, and the per capita disposable income of the rural areas is6977.29yuan, the gap is3.125times. If taking into the consideration of social welfare and guarantee, the income gap would be bigger. The duality of urban and rural income is against our goals of building harmony society and balancing urban and rural development, threatening the quality of economy deeply.On the other hand, with the rapidly improvement of China’s modernization, currencies, stocks, bonds and other financial assets increased sharply. So, the monetization and financialization of China presented a rapid tendency. The financial factor has been one of most important economic variables affecting China’s macro-economy. As high-end emerging tertiary industry, financial industry has more prominent role in modern economy, not only providing financial support, but also being the main way for allocating economic resources. But there are two different directions that financial industry developed:urban financial reform developed rapidly, and being more and more modern; on the contrary, rural financial reform was relatively lagging, still traditional mode.Connecting these two sensitive problems together is the starting point of this paper. According to the home and abroad theories, financial development effecting income gap can be roughly divided into three roads:threshold effect, disequilibrium effect and poverty reduction effect. It is common to analysis this problem from the overall level. Considering China’s dual economic structure, it conforms to the second effect(disequilibrium effect) exactly. By this enlightenment, this paper puts the urban and rural dual structure as variable to refine into the level of urban and financial development, focusing on disequilibrium effect.On the basis of reading abundance of Chinese and foreign scholars’ research, this paper establishes the statistics model between the financial non-balanced development and income gap from the perspective of disequilibrium effect, in order to verify the theory hypothesis and to explain the internal mechanism. This paper consists of five chapters:Chapter One, raise the theme, summarize the home and foreign researches intending to form literature review, and put forward this paper’s basic framework as well as disadvantage.Chapter Two, introduce the development history between China’s income gap and financial development, generalize recent situations of finance. Expound function mechanism of these two problems by referring lessons from Galbis. Chapter Three, introduce the index selection and data sources, and take a brief expression to the statistics mathematical model in order to make preparations for next part.Chapter Four, this part focuses on empirical analysis. Choose financial scale non-balanced index, financial efficiency non-balanced index, urbanization and urban-rural income gap to construct vector error correct model. Elaborate the mutual relationship among four index exactly by unit root test, Granger causality text and Johansen cointegration test, in end using impulse response function and variance decomposition.Chapter Five, on the basis of the current status and conclusion of the empirical analysis, put forward suggestions on the overall financial development. Referring USA rural financial system design put forward corresponding policy advices to improve the rural financial situations.China’s financial development has improvement to the urban and rural income, however, there existed a phenomenon that because of urban-rural dual structure, urban residents benefit more than rural residents, which lead to income gap. Using vector error correct model to explore the internal relationship by establishing four indexes, get following three conclusions:First, the rural-urban income gap is influenced by financial unbalanced scale, financial unbalanced efficiency and urbanization level, form a stable cointegration relationship in the long run, that is, the degree of financial equalization will deepen rural-urban income gap; and the improvement of urbanization level also deepens rural-urban income gap. Second, financial unbalanced scale is a factor which causes the income gap in the short term. Financial unbalanced efficiency and urbanization level will causes the income gap short run and long run. Third, the contribution of financial unbalanced efficiency is higher than financial unbalanced scale, that is to say, inner unbalance have more powerful than total external in influencing rural-urban income gap.